BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Technology longs, Retail longs and Financial longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is falling and volume is slightly above average. Investor anxiety is very high. Today’s overall market action is bearish. The VIX is soaring 27.3% and is very high at 31.58. The ISE Sentiment Index is very low at 74.0 and the total put/call is very high at 1.20. Finally, the NYSE Arms has been running very high most of the day, hitting 4.03 at its intraday peak, and is currently 2.35. The Euro Financial Sector Credit Default Swap Index is jumping +6.91% today to 69.66 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +2.32% to 106.95 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is rising +1 basis point to 24 basis points. The TED spread is now down 440 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +3.99% to 34.19 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -2 basis points to 2.02%, which is down 63 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is down -1 basis point today.Cyclical and Small-Cap shares are under the most pressure today as economic fears rise to the fore once again. As well, (XLF)/(IYR) have traded heavy throughout the day. Bank, Insurance, Hospital, Oil Service, Coal and Disk Drive shares are substantially underperforming, falling 4%+.The market’s severe reaction to today’s news is a big negative.On the positive side, investor angst gauges are soaring with volume only slightly above average.I expect Asia to come under significant pressure Sunday night and negative stories over the weekend, which will likely lead to further US weakness Monday morning. However, I suspect another sharp snapback rally is in the offing early next week. Nikkei futures indicate a -254 open in Japan and DAX futures indicate a -17 open in Germany on Monday. I expect US stocks to trade mixed-to-lower into the close from current levels on rising economic fear, financial sector pessimism, profit-taking and more shorting.

- Spending by U.S. consumers fell in September for the first time in five months after the government’s auto-rebate program expired. The 0.5 percent decrease in purchases matched the median estimate of economists surveyed by Bloomberg News and followed a 1.4 percent jump in the prior month, Commerce Department figures showed today in Washington. Incomes were unchanged, while the savings rate climbed. Stagnant wages and concern over mounting unemployment are causing confidence to wane, raising the risk that consumers will retrench in coming months as government assistance programs run out. The report also showed inflation was lower than the Federal Reserve’s long-term projection, indicating the policy makers can keep rates low.

- Panasonic Raises Full-Year Operating Profit Forecast 60%.Panasonic Corp., the world’s largest maker of plasma televisions, raised its full-year earnings forecasts. Operating profit for the year ending March 31 will probably be 120 billion yen ($1.3 billion), compared with an earlier projection of 75 billion yen, the Osaka-based company said in a statement today.

NYPost:- Aiming to dramatically slash costs, Time Inc. will lay off roughly 540 employees starting next week, company insiders say. The cuts will be staggered over two weeks and wrap up right before Thanksgiving so that the magazine publisher can take a charge against earnings in the fourth quarter. Layoffs are expected to be 6 percent of the workforce, which is now estimated to have shrunk to 9,000 employees worldwide. But even that number is not finalized and could end up bigger. Last year, the company cut 600 people (or 6 percent) from its 10,000 employees and took a charge against earnings of $176 million.

- A weekly measure of future U.S. economic growth rose in the latest week while its yearly growth rate edged lower, indicating that the economic recovery, while easing, is still poised to strengthen in the near term, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index ticked up to 128.4 in the week to Oct. 23 from 127.9 the

- The housing industry contributed to U.S. economic growth for the first time in four years last quarter as federal tax credits sparked demand for homes and energy-efficient renovations. Residential investment accounted for 0.53 percent of growth, a bigger chunk than national defense, at 0.45 percent, and spending on non-durable goods, such as food and clothing, which accounted for 0.31 percent. Samsung forecast a “solid” fourth quarter, echoing comments by No. 1 chipmaker Intel Corp., and said it plans to boost capital spending on semiconductors and displays next year to more than 8.5 trillion won.

- The Earth Cools, and Fight Over Warming Heats Up. Two years ago, a United Nations scientific panel won the Nobel Peace Prize after concluding that global warming is "unequivocal" and is "very likely" caused by man.Then came a development unforeseen by the U.N.'s Intergovernmental Panel on Climate Change, or IPCC: Data suggested that Earth's temperature was beginning to drop. The renewed discussion of inherent shortcomings in climate models comes on the cusp of potentially big financial commitments. In five weeks, diplomats from around the world will meet in Copenhagen to try to hash out a new agreement to curb global greenhouse-gas emissions. The science continues to evolve. Though often overlooked in the debate about man-made warming, natural factors have contributed to record high temperatures. The year 1998, for example, was widely noted as the hottest year on record, intensifying concerns about global warming and people's role in it. But one reason that 1998 set a record is that a strong shift in ocean temperature known as El Niño occurred that year. "1998 was a very hot year because it was an El Niño year," says Mr. Dessler. Scientists who have long questioned man-made global warming cite the temperature drop that began in 2006 as more evidence the models are wrong. "They were predicting warming," says Richard Lindzen, a climate scientist at the Massachusetts Institute of Technology. Mr. Lindzen's work, regarded as leading the research challenging man-made warming, suggests that natural factors such as clouds generally inhibit, rather than intensify, greenhouse-gas warming. He wrote in a recent article that the study from the U.K. admits that the kind of climate model cited in the U.N.'s IPCC report "did not appropriately deal with natural internal variability, thus demolishing the basis for the IPCC's iconic attribution" linking greenhouse-gas emissions to climate change. He added that "even when all models agree, they can all be wrong."

- Chicago Purchasing Manager for October is estimated to rise to 49.0 versus a reading of 46.1 in September.

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- FinalUniv. of Mich. Consumer Confidence for October is estimated to rise to 70.0 versus 69.4 in September.

Upcoming Splits- None of Note

Other Potential Market Movers- The NAPM-Milwaukee report, (JCP) analyst meeting and the (CPN) investor update could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by financial and commodity shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

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